Undernews is the online report of the Progressive Review, edited by Sam Smith, who covered Washington during all or part of one quarter of America's presidencies and edited alternative journals since 1964. The Review has been on the web since 1995. See main page for full contents

July 24, 2009


Individual mandates

John Geyman, MD, Physicians for a National Health Plan - With much fanfare, health insurance mandates were enacted by Massachusetts in 2006 and touted by many as an effective model to reform health care. After three years' experience, here is what the "Massachusetts Miracle" tells us about mandates and their costs:

- Only about one-half of the previously uninsured now have some coverage.

- The public "connector" established to implement the program has added another layer of 4 to 5 percent overhead without enough leverage to rein in costs of private insurers.

- As health insurance and out-of-pocket health care costs take up 15 percent or more of their family income, many people still forego needed care because of costs.

- The state has had to exclude many people from the program, the cost of subsidies (for those earning up to three times the federal poverty level) are much higher than anticipated, and the costs of health care continue to soar out of control (Massachusetts pays one-third more per person than the national average).

- In its budget crisis since the fall of 2008, in order to keep the program going, the state has had to cut safety net programs, including providers, emergency rooms, primary care, and chronic mental health services; and coverage of legal immigrants will soon be eliminated.

- In order to try to get a handle on soaring costs and over-utilization of health care, the state is now considering a plan to radically change how providers and hospitals are paid, eliminating the customary fee-for-service system and replacing it with some kind of risk-adjusted global payments.

Mandates are not a new idea. They have been tried in a number of other states, including California, Oregon, Pennsylvania and Maine. The results in Maine are no better than they are in Massachusetts. As a state with a large rural, poor and elderly population and an economy based on small business, employer-based insurance coverage is limited. The state enacted a law in 2003 with the goal of covering all 130,000 uninsured residents by this year. It has also failed:

- the plan now covers only a small fraction of the target population.

- the state had to cap enrollment due to financing problems.

- Most private insurers have left the state, and the dominant insurer has priced coverage in the individual market beyond the reach of most uninsured.

So we already know that mandates don't work as well as their supporters claim. They have not resulted in universal coverage in any state. They are complex, very expensive, not sustainable, and have unforeseen unintended consequences.

Yet an individual mandate that requires all, or nearly all, uninsured Americans to purchase health insurance is a basic part of all the proposals now being developed in Congress. Government subsidies will be provided for people below specified federal poverty levels, and those who still cannot afford insurance will be exempted. Under the House bill, a family of four earning less than about $88,000 a year won't have to pay insurance premiums that take up more than 11 percent of their income. Individuals will be penalized by fines if they do not have at least a minimal level of coverage. . .

The basic goal of a 2009 health care reform package is to address the problem of 46 million Americans without health insurance through a combined mandate on individuals and employers. The current House bill will cost $1 trillion over 10 years, but will still leave 36 million Americans uninsured, according to the CBO.

Based upon the poor performance of mandates in all states in which they have been tried, why is it that policy makers, politicians, and most stakeholders still support the concept of mandates? The basic answer, of course, is money. Insurers see nearly 50 million new enrollees, many subsidized by the government. The drug industry sees new profits for its products. Hospitals and physicians foresee many previously uninsured patients becoming insured. And many legislators benefit from corporate money flowing into their future campaign war chests.

Based on substantial experience at the state level, we can anticipate that "reforms" based on mandates will be very expensive (for both patients and taxpayers), add even more bureaucracy and complexity than we now have, fail to control costs and still not provide much additional access to care. In sum, if enacted as these bills are shaping up, these "reforms" will be policy failures but another bonanza for the medical-industrial complex

Employer mandates

Employer-sponsored health insurance dates back to World War II when the nation rapidly mobilized to a wartime economy. Facing a severe labor shortage and needing a healthy work force, employers had to compete for workers by offering higher pay and health benefits. IRS rulings freed employers from taxes on the costs of health insurance, and these benefits were not taxable for their employees.

We now have an almost 70 year experience with ESI, and that method of financing U.S health care has been steadily unraveling. Employers today are spending an average of about $10,000 a year for health coverage for each employee with a family of four. Premiums have gone up by 120 percent for ESI since 1999, nearly triple the rate of inflation and six times cumulative wage growth. Only three in five large employers now offer any kind of health care coverage, and many are cutting back or eliminating retiree health benefits. Smaller employers are abandoning ESI at a rapid clip. National surveys have found that the proportion of small businesses offering coverage dropped from 61 percent in 1993 to just 38 percent today.

So are employer mandates good health policy? If we base that answer on history and their track record, instead of ideology and wishful thinking, we have to say no. Employer mandates will not give us an effective way to control health care costs, which will only become a bigger burden on employers and make them even less able to compete in a global economy. Taking General Motors as an example, it has had to spend about $1,500 per car for health care, hardly competitive with manufacturers across the border in Toronto that spend one-fifth of that amount on health care within the Canadian single-payer system.

Employer mandates have been tried for many years in a number of states, and have never resulted in universal coverage or cost containment. The longest experience has been in Hawaii - 30 years - where initial gains in coverage later reverted to growing numbers of uninsured and higher health care costs. Later experiments with employer mandates, often combined with individual mandates, have been carried out in California, Connecticut, Massachusetts, Maine, Minnesota, New Mexico, Oregon, Vermont, and Wisconsin.

Over the years, employer mandates have usually been opposed by the business community, including conservative market advocates and the Chamber of Commerce. In the current debate over reform proposals, the business community is increasingly vocal in its opposition to the cost and burdens of an employer mandate. Flash points in the debate now focus on whether ESI health benefits should be taxed and what exemptions ought to be extended to small business.

Forty percent of the private U.S. labor force works for employers with fewer than 100 employees, who are represented by the National Federation of Independent Business. The small employer market is one of the most profitable markets for private insurers, but small employers find insurance premiums increasingly beyond their reach. According to the Kaiser Family Foundation, premiums for single workers in small businesses climbed by 74 percent between 2001 and 2008. . .

What American business desperately needs is containment of its health care costs and a healthy work force in order to compete in the 21st Century. It will not get that from "reforms" now being debated in Congress. If enacted after political compromises with the major corporate stakeholders, a bill will likely make the plight of American business, as well as the broader public, even worse.

Ironically, the goals of health care reform - cost containment, universal access, and improved quality of care - can be met by single-payer national health insurance, which would provide universal coverage and cost less than what employers and the public are paying now. But since that option would reduce corporate profits in a runaway market system, it is still not being considered by most politicians, beholden as they are to corporate money.


Anonymous Anonymous said...

I think you need to read "The Ten Myths of American Healthcare - A Citizen's Guide" by Sally Pipes.

Medicaid is subpar healthcare and is rampant with fraud. Politicians like to argue that Medicaid administrative costs are lower than those of private healthcare. What they conveniently leave out of the discussion is that doctors and other healthcare providers do much of the paperwork for Medicaid. They don't include that fact in their calculations.

Medicare is a mess. And ask military personnel what they think about Tri-care.

These are all government run programs. Not a pretty picture.

Here is what is characteristic of the govt. health care systems in Canada and Europe: dwindling doctor supply, long lines, rationed care and lack of access to the latest technological equipment.

Quebec's healthcare system is in crisis and is looking to the private sector to pay a greater role, as is Britain - their National Health Service's costs are out of control.

Walk - no, RUN from government controlled health care!

While Europe is looking to

August 8, 2009 11:44 PM  

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